Another suit seeks to apply gift-card laws to Groupon

July 21, 2011|By Wailin Wong | Tribune reporter

Groupon Inc. is facing another class-action lawsuit related to whether its deals should be subject to state laws regulating gift cards, this time on behalf of a Riverside resident who purchased a Nordstrom Rack voucher in 2010.

The complaint was filed in Kane County Circuit Court by St. Charles law firms Foote, Meyers, Mielke & Flowers LLC and Chavez Law Firm. According to the filing, Adam Dremak of Riverside spent $25 on a Groupon in November 2010 that gave him $50 off at Nordstrom Rack. The promotion expired Dec. 31, 2010, and he did not redeem the voucher before then.

The lawsuit contends that Groupons should be classified as gift certificates. Under the Illinois Consumer Fraud and Deceptive Business Practices Act, gift certificates cannot be sold or issued if they have an expiration date within five years of issuance.

"Consumers buy the gift certificates and become subject to the onerous sales conditions imposed by Groupon, including illegal expiration terms, which are relatively short, often just a few months," the complaint said. "Groupon and its retail partners reap a substantial windfall from the sale of gift certificates that are not redeemed before expiration, which is precisely the type of harmful business conduct that the Illinois State Legislature intended to prohibit."

Groupon, which is planning to hold an initial public offering, disclosed last week in a regulatory filing that it and several merchant partners face more than 15 class-action suits related to the issue of whether its vouchers are gift cards. In some cases, laws prohibit gift cards from expiring. Connecticut Atty. Gen. George Jepsen said last week he was looking into the matter as well.

Groupon spokeswoman Julie Mossler said Thursday that the company does not comment on litigation. The company has noted in the past that though promotional pricing on Groupon vouchers does expire, consumers who buy the Groupons can redeem them for face value after that date. For example, someone who bought the $25 Nordstrom Rack voucher last year could have redeemed it for $25, rather than $50, after December 31.

In last week's regulatory filing, Groupon said it "intends to defend these actions vigorously."